Getting tough on mis-sold financial products can only benefit the customer
With stricter regulations coming into force, the days of consumers ending in dire financial straits could soon be over
In the not so distant past, signing up for a consumer or investment product in the UAE was a minefield.
Some residents were able to take out 10 credit cards or more or sign up for a personal loan with a tenure of 20 years. The result: chronic indebtedness and financial desperation.
Others were stung by expensive fixed-term investment products, produced by insurance companies and sold by independent financial advisory firms and banks, that were complex and difficult to understand.
But the news from Nariman Alawadhi, chief manager at the Central Bank, that 100 customers have had the money they invested returned to them following complaints, is the latest sign that things are changing for the better.
Four months ago, the Central Bank created a dedicated Consumer Protection department to better tackle issues raised by consumers and raise awareness of financial illiteracy.
It is one of a series of steps in the UAE’s journey to regulate consumer and investment products marketed by banks and insurance companies.
In 2011 the Central Bank introduced a raft of regulations to prevent consumers getting in over their heads, such as shorter loan tenures and a debt burden ratio of 50 per cent, which ensure a borrower’s debt repayments do not exceed half their monthly salary.
This was followed in 2014 by the introduction of the Al Etihad Credit Bureau, which ensured borrowers' financial behaviour was more closely monitored, preventing them from taking credit from multiple lenders at one time.
This year, after endless complaints about mis-sold investment plans were received by the UAE Insurance Authority (IA) and the Central Bank, both financial organisations took action.
The IA confirmed in April that it was pushing ahead with tough new regulations to transform the way savings, investment and life insurance products are sold in the UAE.
Among the proposals were plans to impose maximum limits on the upfront commission advisers can earn from life companies. Advisers will also have to clearly illustrate all fees and charges for which the client is liable. The changes are expected to come into effect in the fourth quarter of this year.
The IA announcement was followed in May by the Central Bank’s own circular, advising banks and finance companies to resolve all outstanding mis-selling complaints within 90 days.
Getting tough on mis-sold financial products is always positive for consumers to ensure they can grow their money rather than see it swallowed up by high charges.
Hopefully the days of poor financial products being peddled that benefit the person marketing it more than the consumer will soon be over.
Updated: September 19, 2017 07:58 PM